THE LOOMING threat of advancing Black Sea agricultural output has been a constant theme in Aussie ag circles for the best part of two decades.
The bad news is that the production boost is already happening, but the good news is that much of it will occur in commodities other than Australian staples such as wheat and canola.
A team of Western Australian growers, back from a recent visit of farmland and infrastructure in Ukraine, have seen first-hand the immense potential in the region, where fertile soils can support wheat crops of up to 8 tonnes a hectare.
However, in heartening news for Australian croppers, at present the most popular Ukrainian crops will not go head to head with Australia’s key grain exports.
David Fulwood is an experienced visitor to Ukraine, having visited seven times since his trip as part of Nuffield Scholarship in 2005, and he led the recent tour group of growers to the eastern European nation.
He said the current trend in Ukraine was to grow sunflowers, soybeans and corn as the major cash generators of the rotation.
“They can certainly grow wheat, but at present it is more of a rotational tool, allowing them to get their three crops every two years, rather than the major cash crop in its own right.”
In the time since his first visit Mr Fulwood, who farms with his wife at Cunderdin in WA’s Wheatbelt, has seen a massive rise in the hectares cultivated under modern farming practices.
He said the nation was starting to make the most of its substantial natural assets, including the possession of 25 per cent of the world’s chernozem soil and ample rainfall through its natural grass plains, the steppes.
Chernozem, Russian for black earth, is characterised by high organic matter percentages, with humus levels of up to 15 per cent.
This compares to Australian soils often lucky to have 1pc organic matter.
Mr Fulwood said under traditional farming practices wheat yields generally sat at around 3t/ha, with a national average of 4t/ha.
The real quantum leap, however, is when modern farming practices and equipment are used.
“With the soil and the rainfall it is possible to achieve yields of 8t/ha,” Mr Fulwood said.
He said there had been significant gains in production.
“Ukraine suffered in the transition after Communism and the dissolution of the Soviet Union and farming practices did not modernise as quickly as they might have, which mean some years the country was a net importer of grain,” Mr Fulwood said.
“That is not something that is going to happen again, there’s been a real build-up of corporates involved in agriculture there, whether it be farming or in the logistics space, one corporate farmer, Kernel, crops 600,000ha.”
This effort is even more remarkable given Ukraine’s blanket ban on the purchase of agricultural land.
“A lot of the land holdings are only two or five hectares and the corporates must negotiate lease agreements with every landholder,” Mr Fulwood said.
“However, once they get that done, the costs of production are lower than in more affluent countries.”
Tammin, WA, farmer Brad Jones was part of the tour hosted by Mr Fulwood.
It was his first visit to the region and he was blown away by its potential.
“There’s a real changing in the land use there, the returns are favouring crops like soybeans, sunflowers and corn.”
He said issues whereby Ukrainian farmers were unable to access lines of credit held production back in terms of sufficient fertiliser inputs and weed management but said larger entities were now working around that.
“You get the larger corporates and they have the capital to work with.”
Mr Jones said he noted the presence of the ‘ABCD’ behemoths of the grains world – Archer Daniels Midland (ADM), Bunge, Cargill and Louis Dreyfus.
“They have identified the opportunities there and are keen to increase their exposure.”
“They’re building their own supply chains and logistics facilities,” he said.
Richard Hall, senior client advisor with Market Check, said logistics was still a weak point for Black Sea nations.
“You look at something like the Russian wheat crop and exports are limited by what they can physically get out via port, it is a similar story in Ukraine.”
Mr Jones said grain storage was also getting better.
“They do have segregations for their wheat, with Grade 1, 2 and 3 classifications, even their Grade 3 grade having 11.5pc protein, so the quality of the wheat is good.”
Mr Fulwood said the region was still tense geopolitically and said there were risks in doing business in Ukraine, but said at present investors were willing to do so.
“It certainly wouldn’t suit everyone, it is high risk and high reward.”
Along with the tensions with Russia, which erupted most memorably in 2014 with Russia’s annexing of Crimea, Mr Jones also said the research and development sector lagged behind Australia.
“There isn’t much being done by the government, the work is all either by private guys or by the multinational crop protection businesses.”
However, both men on the tour said the natural advantages meant they expected without a serious issue in terms of policy that Ukraine would continue to grow as an exporter of agricultural commodities.